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Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

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Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

Last updated: August 24 2016
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  • #11

    #11

    Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

    Originally posted by rogern View Post
    There is a function in excel which will calculate EMI.. no need for long spread sheets .. m sure some of u already know this .. but just thought of sharing with all ..

    Function is = PMT(rate per month in fraction,Total Number of Months, Loan Amount)

    Jai Excel
    Thats a usefull info. Thanks "rogern"

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    • #12

      #12

      Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

      Originally posted by amjamirs2 View Post
      I did below calculations:

      Suppose Loan Amount is 100L
      For DP, builder is giving discount of 15L
      So loan amount is 85L. With DP, total interest payment in 15 yrs for 85 L is 66L.

      So total cost = 85+66= 151 L

      Now suppose instead of DP with 15L discount, you go by CLP.
      So loan amount is 100L but disbursement done in installments over next 2 years. With this, the interest payment in 15 yrs comes to below 60L.

      Here total cost is about 159L, assuming interest "below 60L=59L"

      So CLP is better. You can do your own calculations in the excel sheet. I assumed interest rate at 8.5%
      I have also tried to calculate. I am not sure if calculations are right, but apparently, based on 2 loan EMI calculators uploaded on Pune forum (yours and an earlier one):

      With tranche EMI, total cost of 23 L loan for 15 years is 36.5L on CLP while with downpayment of 23 L it comes to 40L total. i.e. there is a 3.5L difference between tranche EMI and full EMI. Hence if there is approx 10% discount (36.5/40*23=20.7=10% of 23) for downpayment, then total cost on CLP and on DP will come to the same final amount paid to bank.

      If that is the case, there is absolutely no discount for downpayment at all, even if they say there is 10% discount - so why make downpayment to builder at all?

      Much better to stay with CLP and let the builder earn his disbursement by actually constructing fast.

      Tranche EMI with big principal reduction in early 3 years negates the so called downpayment discount (upto 10%) completely and is much better way to take a bank loan in my (current) opinion.

      15% discount is better - some 8L better on a 100L loan, so some 2L better on a 25L loan.

      So upto 10% discount for downpayment should be disregarded as rubbish. 15% is slightly better - 20% would be worth thinking about.
      Venky (Please read watch a or before posting)

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      • #13

        #13

        Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

        Honestly, I heard about Tranche EMI for the first time. Let me look into this and I will be able to answer something.

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        • #14

          #14

          Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

          Originally posted by Venkytalks View Post
          I have also tried to calculate. I am not sure if calculations are right, but apparently, based on 2 loan EMI calculators uploaded on Pune forum (yours and an earlier one):

          With tranche EMI, total cost of 23 L loan for 15 years is 36.5L on CLP while with downpayment of 23 L it comes to 40L total. i.e. there is a 3.5L difference between tranche EMI and full EMI. Hence if there is approx 10% discount (36.5/40*23=20.7=10% of 23) for downpayment, then total cost on CLP and on DP will come to the same final amount paid to bank.

          If that is the case, there is absolutely no discount for downpayment at all, even if they say there is 10% discount - so why make downpayment to builder at all?

          Much better to stay with CLP and let the builder earn his disbursement by actually constructing fast.

          Tranche EMI with big principal reduction in early 3 years negates the so called downpayment discount (upto 10%) completely and is much better way to take a bank loan in my (current) opinion.

          15% discount is better - some 8L better on a 100L loan, so some 2L better on a 25L loan.

          So upto 10% discount for downpayment should be disregarded as rubbish. 15% is slightly better - 20% would be worth thinking about.
          It also depends on how the payment schedule is structured in CLP. If major part of the flat cost need to be paid during initial period, total cost will go up. If payment is uniformly distributed, total cost goes down in long run.

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          • #15

            #15

            Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

            Originally posted by amjamirs2 View Post
            It also depends on how the payment schedule is structured in CLP. If major part of the flat cost need to be paid during initial period, total cost will go up. If payment is uniformly distributed, total cost goes down in long run.
            Your interest calculator is really great.

            I was able to see what would happen if the project gets delayed after 2-3 disbursals. On a 25 L amount, cost is 39L with scheduled payments, only 36 L with some delayed payment scenario.

            The benefit of CLP is truely realised with Tranche EMI
            Venky (Please read watch a or before posting)

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            • #16

              #16

              Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

              Most projects are delayed for > 9 months with some beyond 1 year. One has to factor that in mind. In today's times it is best to go for a re-sale as there are many available. For those who do not need a loan, the CLP works best if they select a reputed builder if there is still one, but still assume a 1 year delay.

              Any other choice will lead to sleepless nights as pre-emi gets computed. Any discount is eaten away by this.

              All builders are overleveraged and move money around to manage their cash flow.

              One should use reverse psycology here. If a builder is ready to discount 20% for full payment then there is a high possibility his financial condition is shaky and is only doing so out of need and other financial sources are atleast 20% more expensive to him then the discount. Which also means the banks are not ready to lend to him, a very bad sign for any project.

              If I know there is a builder offering 20% discount I will stay away from him with the longest pole. If I want the apt at 20% lower, I will try to find a resale investor and see if he is willing to take my offer.
              Last edited by rameshyahoo; July 31 2010, 07:56 AM.

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              • #17

                #17

                Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

                Good point ramesh yahoo. Builders offering DP discounts are dangerous.

                My point about 20% discount was not that I wanted it, but that 10% is not worth it.

                Re: Pre-EMI, avoid it. Go for tranche EMI instead - on a CLP - thats what we are discussing after all!!!!

                My point is, with or without a loan, CLP is financially the best
                Venky (Please read watch a or before posting)

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                • #18

                  #18

                  Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

                  rogern: Thanks for the EMI function tip

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                  • #19

                    #19

                    Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

                    Originally posted by Venkytalks View Post
                    Good point ramesh yahoo. Builders offering DP discounts are dangerous.

                    My point about 20% discount was not that I wanted it, but that 10% is not worth it.

                    Re: Pre-EMI, avoid it. Go for tranche EMI instead - on a CLP - thats what we are discussing after all!!!!

                    My point is, with or without a loan, CLP is financially the best
                    Hey venky..seriously speaking i heard trench EMI first time..do you have idea of any other Bank other than HDFC providing same product?
                    Secondly, In simple Pre-EMI can we pre pay the principal amount also?
                    e.g. loan amount is 30L and bank has disbursed only 8L till now..so can we make some payment that will contribute to that principal amount?

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                    • #20

                      #20

                      Re : Comparison of CLP on Tranche EMI vs. Downpayment with discount from builder

                      Hi deepak mittal.

                      Yes, pre-emi pays only interest. Full EMI with principal and interest starts after 3 years if you opt for pre-EMI option.

                      Usually people opt for pre-EMI if they cannot afford both full EMI and rent on their salary.

                      But if you can afford, you should pay as much EMI as possible in the early part of the loan with CLP. This pays back a lot of principal and little of interest, so when full loan is disbursed, your principal becomes less by about 10% (same as your so-called downpayment discount).

                      According to earlier posts, every bank will allow this in theory - in practice, they might not like it (its against the banks "interest" to have a lot of principal paid back quickly

                      Its a good scheme for own flat from reliable builder.

                      Not so great for investors and speculative builders - there a pre-EMI is better since there is less financial involvement (tranche EMI means much more is paid, almost like the EMI of a downpayment)
                      Last edited by Venkytalks; August 10 2010, 10:43 PM.
                      Venky (Please read watch a or before posting)

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